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Monday, 25 June 2018 20:50

Russia backs OPEC oil output hike

Vienna - Russia on Saturday joined partner countries in backing an OPEC-led pledge to boost oil production in response to growing global demand, Angolan Oil Minister Diamantino Azevedo said.
"We have agreed," Azevedo told reporters after a meeting with OPEC ministers and 10 non-OPEC partner countries in Vienna.
The green light was widely expected after energy ministers from the 14-member Organization of Petroleum Exporting Countries already agreed on Friday to raise output by one million barrels a day from July.
The proposal is the result of a face-saving compromise hammered out after days of diplomacy in Vienna dominated by tensions between Iran and archfoe Saudi Arabia over amending an 18-month-old supply-cut deal that has lifted oil prices to multi-year highs.
Saudi Arabia, supported by Russia, was strongly in favour of pumping more oil to ease fears of a supply crunch and quiet grumbles about the higher prices in major consumer countries like the United States, China and India.
In the end, a vaguely-worded statement that made no mention of the one-million figure allowed all sides to save face.
Ministers also acknowledged that production problems in several countries meant the real number of extra barrels coming to the market would be several hundred thousand less.
Markets were disappointed with the modest output hike, sending crude prices soaring on Friday.
Brent crude added $2.50 to finish at $75.55 a barrel, while the US benchmark West Texas Intermediate gained $3.04 at $68.58 per barrel.
As one of the world's top producers, Russia's cooperation in the supply-cut deal is seen as crucial.
Moscow had long argued for a hike, feeling the pressure from domestic oil companies eager to produce more so they can cash in on the higher prices.
Russia's Energy Minister Alexander Novak had said ahead of Saturday's meeting that it was "timely" for OPEC and its 10 partner countries, known as OPEC+, to raise production.
Numbers game
The OPEC+ supply-cut pact struck in late 2016 and set to run until the end of the year, called on participants to trim output by 1.8 million barrels a day.
But production constraints and geopolitical factors have seen several nations exceed their restriction quotas, keeping some 2.8 million barrels off the market, according to OPEC.
By agreeing to collectively raise output by a million barrels, members are simply committing to comply fully with the deal struck in late 2016 - allowing them to increase supply without undoing the original deal.
"I agreed to have 100% of compliance, not more," Iran's Zanganeh said as he left OPEC headquarters on Friday.
Saudi Arabia's Energy Minister Khalid al-Falih said the agreement would "contribute significantly to meet the extra demand that we see coming in the second half".
But the joint communique did not spell out how the additional barrels would be divvied up, a key issue given Iran's insistence that cartel members should not be allowed to offset involuntary production losses in other member countries.
Much of the current production shortfall has come from Venezuela, where an economic crisis has savaged petroleum production.
In Libya, fighting between rival factions has damaged key oil infrastructure.
This week's OPEC talks in Vienna have been the most politically charged in years.
US President Donald Trump, hoping for lower pump prices ahead of November's mid-term elections, has been among the loudest critics of OPEC's supply cut pact, piling pressure on key ally Riyadh to boost output.
Trump weighed in again after Friday's OPEC decision was announced, tweeting: "Hope OPEC will increase output substantially. Need to keep prices down!"
Iran's Zanganeh earlier this week accused Trump of trying to politicise OPEC and said it was US sanctions on Iran and Venezuela that had helped push up prices.
Credit: News24
Published in News Economy

Saudi oil giant Aramco is buying an equity stake in Malaysian firm Petronas' major refining and petrochemicals project in the southeast Asian country, investing a total of $7 billion, the companies confirmed on Tuesday.
In a joint statement, the firms said Aramco will take a 50 percent stake in select ventures and assets in the Refinery and Petrochemical Integrated Development (RAPID) project developed by Malaysian state-controlled Petroliam Nasional Berhad, known as Petronas. The deal signing was formally witnessed by Malaysian Prime Minister Najib Razak and Saudi King Salman, currently on a state visit to Malaysia.

Petronas' Chief Executive Officer Wan Zulkiflee Wan Ariffin told reporters Aramco will take a 50 percent stake in RAPID's refinery and cracker project.

"Malaysia offers tremendous growth opportunities and today's agreement further strengthens Saudi Aramco's position as the leading supplier of petroleum feedstock to Malaysia and Southeast Asia," Aramco CEO Amin Nasser said. "With RAPID's strategic location in a prolific hub, it would also serve to enhance energy security in the Asia-Pacific region." Aramco will supply up to 70 percent of the crude feedstock requirement of the refinery, with natural gas, power and other utilities to be supplied by Petronas.

RAPID will contain a 300,000 barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tonnes. It is expected to go online in the first quarter of 2019. The facility is planned as part of the Pengerang Integrated Complex (PIC) in the southern Malaysian state of Johor that will include RAPID and oil storage facilities. Petronas on Tuesday said almost 60 percent of the PIC development is complete, and that it is on track for refinery start-up in 2019.

Saudi Energy Minister Khalid al-Falih echoed Nasser's comments, saying Saudi Arabia would use the Malaysian investment as a platform other investments in southeast Asia. "We will encourage the private sector of Saudi Arabia to come and look at Malaysia as an investment for its own market and also to address the needs for the broader region," he said.


- Reuters

Published in World
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